Q: Can you confirm whether Congress changed the age for required minimum distributions from retirement accounts? I am currently age 71 and will turn age 72 in April of 2023.
A: It was easy to miss, but yes, budget legislation that was signed into law on December 23, 2022, included bipartisan provisions affecting retirement savings — the SECURE 2.0 Act of 2022. The age for starting Required Minimum Distributions (RMDs) was increased from age 72 to age 73 starting January 1, 2023. This law also gives you one additional year to delay taking a mandatory withdrawal from your retirement accounts without incurring a big tax penalty.
RMD rules allow owners of retirement accounts such as traditional IRAs, 401(k), and other types of retirement accounts to delay taking their first RMD until April 1 of the following year, but that also means that a second RMD would need to be taken for the year. Previously you may have planned to take your first RMD by December of this year, or no later than April 1 of 2024. Now you may delay until December of 2024 or by April 1 of 2025, taking a second RMD by December 2025.
Starting this year, the punishing penalty for failing to take an RMD will decrease from 50% to 25% of the amount not taken on time.
Organizing your retirement budget will help you and your financial advisor develop a withdrawal plan that could help you reduce taxes and stay within your budget. Uncertain financial conditions are expected to continue well into this year and seeking good advice and planning could be one of the best investments you make this year.